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M&A at a glance (July 2014)

M&A activity in June 2014 signaled a return to the state of the market prior to the credit crisis. Globally, total and strategic deal volumes continued their upward march in June 2014, reaching $340.64 billion and $291.73 billion, respectively. Except for sponsor-related transactions, average deal size showed continued signs of recovery with average deal size for strategic transactions increasing 30% compared to the previous month. The appetite for larger deals was also present in the U.S. Although volume and deal numbers remained relatively flat, the average value of U.S. deals rose to $493 million in June 2014 (a 13% increase from May 2014). Figure 1.

We also note that, as has been widely reported in the press, "inversion" transactions (i.e., transactions involving the relocation of U.S. companies to non-U.S. domiciles in large part to take advantage of tax benefits) have been on the rise. The impact can be seen in both industry data and U.S. crossborder transactions. The most active industry in June 2014 - Healthcare - was propelled by the $46.9 billion inversion deal between U.S.-based Medtronic Inc. and Ireland-headquartered Covidien plc. Figure 2. Similarly, inversion transactions resulted in the U.K. taking the top spot for outbound U.S. crossborder transactions by volume in June 2014. Figure 3.

Although public and private deals are increasing globally and in the U.S., June 2014 was notable for the absence of megadeals. The largest U.S. deal of June 2014 - the contemplated acquisition of Integrys Energy Group, Inc. by Wisconsin Energy Corporation at $5.23 billion - pales in comparison to the megadeals seen in recent months. Figures 4 and 5.

Lastly, we note that June 2014 saw a decline in go-shop provisions (only 5.9% of U.S. public mergers), possibly indicating greater confidence in pricing and a more robust marketplace for transactions. Figure 8. We also note that over one-third of U.S. public mergers were tender offers in June 2014, the highest such percentage seen this calendar year. Figure 11.

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